Daily iron ore price update (dead cat bounce)

The ferrous complex dead cat bounced yesterday which is entirely normal for a grand bear market. Spot launched higher and paper kept running overnight:

Funny stuff typical of a bear market.

Not much to report in wider news. Evergrande will be restructured. It is not the problem. This is NOT over:

  • Chinese property demand will keep slowing.
  • More steel output cuts are ahead.
  • Supply is rising.
  • China now has a steel glut and plenty of iron ore to boot.

Unless or until China panics and stimulates, we must fall to the lowest marginal cost producer around $60 to have any chance of stabilising prices.

That said, seasonality will turn bullish in another six weeks or so and that might help a little.

Then again, steel output cuts have done a lot to suppress the raw material inventory cycle so we may just see a rerun of 2015 when prices kept on falling right through the new year.

Either way, in the absence of Chinese panic it’s $60 sooner rather than later.

Houses and Holes
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